Tata Steel merger worries workers with a precedent
LONDON // Dutch steel workers are due to hold protests today and their British colleagues know all too well the fears that will lie behind the picket lines and placards.
The Dutch workers at Tata Steel plan to protest over the possible combination of its European business with Germany’s Thyssenkrupp.
Workers in all three countries are wary of a deal that will combine the second and third-biggest steel producers in Europe.
The possible joint venture between Tata Steel and Thyssenkrupp first raised its head in July, in the fraught days following the United Kingdom’s vote to leave the European Union.
The future of Tata Steel’s loss-making business in the UK had been in the headlines since March, when India’s Tata said it would sell the entire UK operation – placing 15,000 jobs at risk and jeopardising many more in the supply chain.
A string of bidders lined up for the UK operations and the government pledged hundreds of millions of pounds of help.
By the summer, it was evident there was not going to be a quick or easy resolution to the situation. The future of Port Talbot in Wales, the UK’s largest steel plant, where 4,000 people work and where there has been huge investment in plant and operations, was at the forefront of media coverage .
The major stumbling point for buyers was the £500 million (Dh2.43 billion) deficit in the steel industry pension scheme – which would-be buyers did not want to be saddled with.
Some 4,000 jobs were saved at Tata’s Scunthorpe works, in north-east England, when the long-products business was sold to the private equity group Greybull Capital for a nominal £1. Workers at sites in Lincolnshire, Teesside, Workington and York had to accept a 3 per cent pay cut as part of the deal.
Then came the Tata-Thyssenkrupp move, which took most industry commentators by surprise.
Putting together Tata Steel and Thyssenkrup would be the biggest shake-up of the sector for a decade and might go some way to solving the European steel industry’s longstanding problems of excess production capacity.
However, inevitably plants would close – causing thousands of job losses – as the new company sought to boost its pricing power.
Cyrus Mistry, the chairman of Tata Steel, says in the company’s latest annual report that consolidation of the global steel industry is important and “would provide an opportunity to the steel industry to remain relevant and competitive in terms of costs and value to the customers”.
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On Monday, Tata Steel posted a third straight quarterly loss on account of a global supply glut that pressured prices and discontinued operations at its long product business in the UK.
The Mumbai-based company’s net loss widened to 31.8 billion rupees (Dh2.31bn) in the three months through June from a restated 3.17bn rupees loss a year ago. This includes net loss from discontinued operations of 33.6bn rupees in the latest quarte. Sales for the quarter slipped to 264.1bn rupees, missing analysts’ estimates.
Now, six months on from Tata’s admission of defeat, uncertainty still looms large for around 11,000 other Tata workers, including the Port Talbot employees.
British steel sources have said that negotiations over a possible “joint venture” between the two companies have been quiet, but are continuing. However, they do not look likely to be resolved quickly.
The problem of the pension deficit remains the biggest stumbling block. Thyssenkrupp is understood to want Tata to shore up the pension scheme –make good the deficit – as a precondition of any deal.
Tata Steel’s spokesman said this month: “Our aim remains to find a sustainable future for our UK business. There are a number of options which we are pursuing to achieve that.
“These are complex discussions involving very significant enterprises. We’ll be looking to move as quickly as is practical and sensible, in order to give greater clarity to everyone involved – customers, employees, suppliers, shareholders – but we’re not going to set arbitrary deadlines just for the sake of it. We don’t consider that to be in the best interests of getting a good outcome that works for all stakeholders.”
Other bidders – who include Sanjeev Gupta of Liberty House, which was run from Dubai between 2008 and 2015 – continue to talk to Tata in the background. A twin-track approach appears to be being taken.
Union leaders, however, are unnerved by Tata’s silence. One union, Community, says that the workforce at Port Talbot have lost confidence in the management and are frustrated that they are not being kept informed about the progress of talks.
“As far as production is concerned it’s business as usual but what a future company might look like we just don’t know,” says Matt Ball, a spokesman for Community. “We are reserving our judgment [on the combination of Tata Steel and Thyssenkrupp] because we don’t know the detail.”
Port Talbot is not the most efficient plant in the group, while Thyssenkrupp also has newer, more cost-effective operations. The worry is that Port Talbot could fall victim to the need to take out excess capacity.
The weaker pound, since the Brexit vote, has given parts of the indusry a reprieve. But it has also made imports of raw materials – bought in dollars – more expensive.
In Holland there are also grave doubts about a merger with Thyssenkrupp. Dutch steel workers at the Tata plant at Ijmuiden, a seaport city in the north of the country, are planning to hold protests today and want the Dutch government to intervene, as 4,000 Dutch jobs are under threat.
“German, French and other governments are not afraid to come up for national industrial interests,” says Dezentie Hamming-Bluemink, a director of the Dutch employers’ organisation FME.
“It is time that our government does the same. The government must step into the breach to preserve the unique position of the Dutch steel company.”
Thousands of Thyssenkrupp workers have also demonstrated against consolidation and restructuring at the steel unit’s headquarters in Duisburg, Germany.
“The meaningfulness of a consolidation doesn’t explain itself,” said Detlef Wetzel, who represents the IG Metall labour union. He urged the company’s executives to justify why and how they plan to cut costs by as much as €1.6bn (Dh6.59bn), which may include site closures.
For all the workers involved in the European steel industry’s latest convulsions, there is little comfort in strong words and public pleadings – and that is not likely to change soon.
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Published: September 14, 2016 04:00 AM